APPENDICES. 11 March 2016 INVESTMENT SAVINGS INSURANCE BANKING

Transcription

1 APPENDICES 11 March 2016 INVESTMENT SAVINGS INSURANCE BANKING

2 INDEX TO APPENDICES Appendix 1 Group Performance Slides A3-A17 Appendix 2 Capital/Treasury Slides A18-A22 Appendix 3 Free Surplus Generation Slides A23-A27 Appendix 4 Solvency II Slides A28-A36 Appendix 5 Business Units Slides A37-A57 - Old Mutual Emerging Markets (slides A38-A48) - Nedbank (slides A49-A50) - Old Mutual Wealth (slides A51-A55) - Institutional Asset Management (slides A56-A57) A2

3 APPENDIX 1 GROUP PERFORMANCE INVESTMENT SAVINGS INSURANCE BANKING

4 SUMMARISED P&L m m Revenue Banking interest and similar income 3,057 3,320 Expenses Banking interest payable and similar expenses (1,672) (1,924) Fee and commission income 2,894 3,027 Change in invest. contracts (3,544) (2,203) Net earned premiums 2,901 3,254 Net claims & benefits (3,883) (3,171) Investment return & other 6,626 4,094 Admin. expenses & other 1 (5,039) (5,109) 15,478 13,695 (14,138) (12,407) m Net revenue 1,340 1,288 Profit/losses on disposals & discontinued ops (52) (57) Associate & JV income Tax (462) (374) IFRS Profit after tax Attributable to: Equity holders of the parent Non-controlling interests Ordinary shares Preferred securities Includes impairment of goodwill and other intangible assets of 23m (2014: 14m). 2. Includes Nedbank preference shareholders. A4

5 AOP SIMPLIFIED OPERATING RESULT 1 m % reported % constant currency Business Unit AOP post-tax and NCI ( m) Business Units AOP 1,745 1,825 5% 11% 2014: 868m : 931m Central activities 2 (140) (162) (16%) (14%) Total AOP (pre-tax & NCI) 1,605 1,663 4% 11% Taxation (439) (403) 8% 1% Non-controlling interests (298) (329) (10%) (21%) AOP post-tax & NCI % 14% Old Mutual Emerging Markets Nedbank Old Mutual Wealth Institutional Asset Management (118) (139) Central 2 Activities 1. Core business only. 2. Includes finance costs, LTIR on excess assets, intercompany interest to non-core subsidiary, corporate costs and other net shareholders expenses. A5

6 2015 PROFIT ANALYSIS 1 : H1 vs H2 m H H in reported currency in local currency Old Mutual Emerging Markets (15%) (1%) Nedbank (13%) 1% Old Mutual Wealth % 3% Institutional Asset Management (20%) (20%) Business Units AOP (12%) Finance costs (42) (41) 2% Other 2 (25) (54) (116%) AOP pre-tax & NCI (16%) Taxation (Tax rate H1: 26.0%; H2: 22.1%) (235) (168) 29% Non-controlling interests (NCI rate H1: 25.0%; H2: 27.4%) (167) (162) 3% AOP post-tax & NCI (15%) Adjusted operating EPS (13%) Average Rate ZAR:GBP USD:GBP Core business only. 2. Includes LTIR on excess assets, intercompany interest to non-core subsidiary, corporate costs and other net shareholders expenses. A6

7 SOURCES OF EARNINGS (AOP) 2015 AOP 1 ( 931m) by geography 2015 AOP 1 ( 931m) by line of business UK, Europe & Int. 24% Asia & LatAm 1% Rest of Africa 5% US 8% South Africa 62% 2014 South Africa 64% UK, Europe, Int. 20% US 9% Rest of Africa 5% Asia & LatAm 2% 2014 Life & savings 46% Banking & lending 30% Asset Management 21% Property & Casualty 3% Life & savings 45% Banking & lending 3 29% Asset Mgt 2 23% Property & Casualty 3% 1. Core operations post-tax and NCI and includes LTIR. Central activities have been allocated pro-rata for presentational purposes. 2. Includes Institutional Asset Management, OMGI, Quilter Cheviot, OMEM and Nedbank s asset management businesses. 3. Includes Nedbank, OMSFIN, Faulu in Kenya, CABS in Zimbabwe and from FY 2014 Old Mutual Finance. A7

8 EARNINGS SPLIT BY HALF YEAR AND KEY STATISTICS 1 pence/share AOP EPS - H AOP EPS - H H1: H2 51% : 49% 52% : 48% 49% : 51% 51% : 49% 49% : 51% 53% : 47% ZAR:GBP (Ave. Rate) bn Funds under Management pence/share IFRS net asset value per share Core business only. 2. After adjusting for the 7:8 share consolidation, following payment of special dividend. 3. Restated for the impact of changes in IAS 19 & IFRS Net asset value per share is calculated as ordinary shareholder s equity (i.e. excluding the perpetual preferred callable securities) divided by actual shares in issue at the end of the period. A8

9 RECONCILIATION OF 2015 AOP TO CHANGE IN EQUITY HOLDERS FUNDS 1 ( m) (167) (97) (42) (38) (31) (343) 1,663 1,288 (21) (1,176) (611) AOP (pre-tax & NCI) Goodwill impairment & acquisition accounting Old Mutual Wealth business transformation costs Short-term fluctuations in investment return Other adjusting 2 items Non-core operations IFRS profit (before tax) Total tax Discontinued ops expense3 4 (after tax) IFRS profit (after tax) Other comprehensive income5 Transactions with shareholders Change in shareholders' equity from 31 Dec Total Group including perpetual preferred callable securities, ordinary shareholders equity and non-controlling interests. 2. Other adjusting items consists mainly of dividends declared to holders of perpetual preferred callable securities 31m, Institutional Asset Management equity plans ( 9m), net loss on disposal of subsidiaries, associated undertakings and strategic investments ( 36m), credit-related fair value gains on Group debt instruments 7m and investment return adjustment for Group equity and debt instruments held in life funds ( 31m). 3. Net of income tax attributable to policyholder returns. 4. Represents divestment costs incurred in relation to the sale of US Life in Includes currency translation differences on translating foreign operations of ( 1,106m). A9

10 LTIR CALCULATION METHODOLOGY Long-term investment rates Old Mutual Emerging Markets: Long-term business 8.0% Cash, deposits & bonds: 75% Equities: 25% 8.0% Cash, deposits & bonds: 75% Equities: 25% 8.0% - 8.5% Cash, deposits & bonds: 75% Equities: 25% Old Mutual Emerging Markets: Property & Casualty 7.4% Cash, deposits & bonds: 90% Equities: 10% 7.4% Cash, deposits & bonds: 90% Equities: 10% 7.4% Cash, deposits & bonds: 90% Equities: 10% Old Mutual Wealth 1.0% S/T cash & deposits: 76% L/T bonds: 24% 1.0% S/T cash & deposits: 75% L/T bonds: 25% 1.0% S/T cash & deposits: 75% L/T bonds: 25% 1. The long-term rates are derived from a review of risk-free 10 year Government bonds, 3 month Libor and money market rates. Old Mutual Emerging Markets: Long-term business and Property & Casualty hold equities in their asset portfolios and a risk premium is added to the Government Bond rate to derive an expected return from equities. These rates are weighted against the prescribed targeted long-term asset mix in each BU s asset portfolio to arrive at a blended long-term rate, as disclosed above. A10

11 ADJUSTED GROUP NAV 1 8,820m m 31 Dec 2015 Open books 4 2,161 OMAM 2 Nedbank 2 9.4% 24.2% 825 2,136 UK Heritage Old Mutual Wealth 2,699 m 31 Dec 2015 Life & Savings 5 2,469 Asset Management 273 OM Wealth 30.6% 2,699 Property & Casualty 300 Banking & Lending 218 OM Emerging Markets OM Emerging Markets 3,260 Other % 3,260 m 31 Dec 2015 OM Bermuda 220 External debt 6 (1,434) BEE and ESOP scheme uplift adjustments 118 (1.2%) (100) Net other business Other (100) 1. IFRS basis other than where stated. 2. OM plc share of OMAM and Nedbank at market value (31 December 2015). 3. Includes Group assets and liabilities, Old Mutual Bermuda and Rogge. 4. Includes IFRS NAV of Quilter Cheviot (represented by assets acquired and goodwill) as well as capital funding from GHO to fund the acquisition. 5. MCEV basis. MCEV information is subject to departures from MCEV Principles (Copyright Stichting CFO Forum Foundation 2008) due to the use of the government bond yield curve in the majority of Emerging Markets. 6. External debt held at Old Mutual plc Head Office and valued at Market value. 7. Mostly Old Mutual plc Head Office IFRS NAV net of group adjustments and excluding external debt. Includes Rogge. A11

12 ADJUSTED GROUP NAV PER BU m Pence per share 8,820m 178.9p % , % , % , % 66.1 (100) (1.2%) (2.0) OM Emerging Markets OM Wealth Nedbank OMAM Other 1 1. Includes Group assets and liabilities, Old Mutual Bermuda and Rogge. A12

13 ADJUSTED GROUP NAV ( m) 135.5p (5.6p) 3.4p 13.5p 2.4p 30.1p (0.4p) (17) 178.9p 1, ,680 (273) Nedbank 426m Institutional AM 238m Emerging Markets 1,299m OM Wealth (UK Heritage) 183m 8,820 Group IFRS NAV (Equity) attributable to ordinary shareholders Deduct book value of perpetual preferred callable securities Add Life Fund investments in OM plc debt and equity Market value Uplift for excess adjustments for listed shares held in BEE, businesses and Staff Trust and ESOP quoted debt schemes Life insurance MCEV uplift 1 Other adjustments Adjusted Group NAV attributable to ordinary shareholders 1. OM Wealth uplift relates to the UK Heritage business (includes Protect and Series 6 pensions) only. A13

14 MOVEMENT IN ADJUSTED GROUP NAV ( m) 221.9p (1.0p) (30.6p) (14.9p) 12.1p (8.6p) 178.9p (1,501) (735) 593 (426) 10,889 10,889 8,820 Adjusted Group NAV at 31 Dec 2014 Dilution 1 Change in currency 2 translation Change in Nedbank and OMAM share price (in ZAR 3 and USD) General business growth and other movements Old Mutual plc cash dividends paid to ordinary shareholders Adjusted Group NAV at 31 Dec Impact of dilution due to the additional number of shares at 31 December 2015 versus 31 December Of which (32.2p) is ZAR/GBP and 1.6p is USD/GBP and EUR/GBP. 3. Of which (13.9p) is Nedbank and (1.0p) is OMAM. A14

15 ADJUSTED GROUP NAV FY 2015 FY 2014 Equity attributable Equity attributable Adjusted Group AOP post-tax & Adjusted Group AOP post-tax & to equity holders to equity holders NAV NCI NAV NCI of the parent of the parent m Old Mutual Emerging Markets 1,805 3, ,927 3, Life & Savings 1 1,002 2, ,180 3, Asset Management Property & Casualty Banking & Lending Nedbank 1,710 2, ,069 3, Old Mutual Wealth 2 1,950 2, ,125 2, Open books 3 1,595 2, ,517 1, UK Heritage Europe closed book OMAM Other and non-core operations (100) Group 6,680 8,820 7,406 10, Included in Life & Savings AOP (after tax and NCI) is R111m of profit relating to life-wrapped business invested in OMUT unit trusts. These profits have been accounted for as Asset Management in AOP reporting for FY AOP post-tax and NCI value for Old Mutual Wealth excludes profits from businesses sold during the respective periods of 6m for 2015 and 21m for The IFRS NAV of Quilter Cheviot (represented by assets acquired and goodwill) as well as capital funding from GHO to fund the acquisition is included in the 2015 Open books Adjusted Group NAV value. 4. OMAM only. 5. Includes Rogge. A15

16 16.0bn ASSET MANAGEMENT CAPABILITY Group FuM 327.9bn Old Mutual Wealth 104.4bn 1 Emerging Markets 43.4bn Nedbank 11.9bn Institutional Asset Management 168.2bn UK 40.7bn OMGI 24.7bn Life & Savings 18.9bn OMIG 24.5bn OMAM 144.1bn Rogge 24.1bn 2 International 16.0bn 3 rd Party Retail ROA 3.2bn 3 rd Party Retail 3.0bn US Equity 52.2bn Quilter Cheviot 17.8bn 3 rd Party Institutional Asia & LatAm 6.3bn 3 rd Party Institutional 4.2bn Global / Non- US Equity 57.5bn MFV 13.9bn In-house 8.7bn South Africa 9.4bn In-house 17.3bn US Fixed Income 9.4bn Alternative, Timber and Real Estate 25.0bn 1. Old Mutual Wealth excludes OMGI in-house FuM, which is recorded in other parts of the business unit. 2. Rogge is classified as held for sale. A16

17 HEADLINE TARGETS Group (OM plc) Old Mutual Wealth Emerging Markets Nedbank (medium to long-term targets) 1 Property & Casualty RoE: Operating Margin: 12-15% 2 40% RoE: 20-25% Diluted headline earnings per share growth: CPI + GDP growth + 5% Sustainable Top 2 position in the South African market Solvency II: Above early warning threshold of 120% Dividend Cover: 2.5 to 3.5 times Group AOP earnings R1 billion pre-tax synergies by the end of 2017 RoE (excl. goodwill): 5% above cost of ordinary shareholders equity NIR : Expenses ratio > 85% Efficiency Ratio 50% - 53% Credit loss ratio: Between 0.6% and 1.0% of average banking advances Underwriting Margin: 4-6% (combined ratio of 94-96%) Significant P&C operations in the RoA in major markets, supporting the Group s African expansion Common-equity tier 1 capital adequacy ratio (Basel III) 10.5% % 1. The credit loss ratio target changed in the current year from 0.8% - 1.2% target based on the Group in its current construct. A17

18 APPENDIX 2 CAPITAL / TREASURY INVESTMENT SAVINGS INSURANCE BANKING

19 FGD Regulatory capital FY FY bn % bn % Ordinary equity % % Other Tier 1 equity 0.4 7% 0.4 9% Tier 1 Capital % % Tier 2 Capital % % Deductions from total capital (1.1) (20%) (1.0) (22%) Total capital resources % % Total capital resource requirements Group FGD surplus Coverage ratio 164% 160% 1. As submitted to the Prudential Regulation Authority (PRA) on 30 April Based on the preliminary estimates. Formal filing due to the PRA by 30 April A19

20 SUMMARISED BALANCE SHEET m m Assets Liabilities Loans & advances 34,857 30,965 Bank deposits 36,243 32,328 Investments & securities 87,547 82,601 Insurance reserves Goodwill & intangibles 2,763 3,276 - Life insurance products 10,519 7,714 Other 17,349 16,706 - Investment products 68,841 67,854 - Property & casualty Third-party interests in consolidated funds 5,986 4,661 Borrowed funds 1 3,044 3,524 Other 8,019 8, , , , ,614 Net Assets 9,545 8,934 Attributable to: Shareholders equity 9,545 8,934 Equity holders of the parent 7,406 6,680 Non-controlling interests Ordinary shares 1,867 1,982 Preferred securities ,545 8, Includes Nedbank. 2. Includes Nedbank preference shareholders. A20

21 OLD MUTUAL GROUP COMPANY RATINGS 1 Moody s Fitch Republic of South Africa Sovereign rating (S&P: BBB- (neg)) Baa2 (rfd) BBB- Old Mutual plc Senior debt rating Baa3 (neg) BBB T2 debt rating Ba1 (neg) BB+ T1 debt rating Ba2 (neg) BB+ Short-term debt rating P3 F2 OMLAC (SA) National insurance financial strength N/A AAA National long-term rating N/A AAA National long-term subordinated debt rating N/A AA Global insurance financial strength Baa1 (neg) Not rated Mutual & Federal Insurance Company Limited National insurance financial strength N/A AAA Old Mutual Wealth Life Assurance Limited Insurance financial strength A2 (neg) A- Nedbank Long-term foreign currency rating Baa2 (neg) BBB- 1. Ratings outlook stable unless stated otherwise; neg = negative outlook; rfd = review for downgrade. A21

22 SOURCES AND USES OF PLC CASH m Operational remittances OM Emerging Markets (Rand) Nedbank Ordinary cash dividends SA register (227) (254) UK register (184) (172) (411) (426) Operational remittances (hard currency) Structural hard currency outflows OM Wealth Institutional AM Interest 1 (64) (62) Corporate costs (55) (57) Other operational flows 20 (40) (99) (159) Hard currency deficit (46) (92) Add back: Old Mutual Wealth business transformation costs Hard currency surplus (excl. OMW business transformation costs) Includes preference dividends. A22

23 APPENDIX 3 FREE SURPLUS GENERATION INVESTMENT SAVINGS INSURANCE BANKING

24 EMERGING MARKETS: VIF CONVERSION TO FREE SURPLUS Opening VIF VIF Conversion Opening VIF VIF Conversion In-force: m m % Years m m % Years Emerging Markets 1, % 7 1, % 7 A24

25 SOURCES OF FREE SURPLUS m Generated by operations: - OM Emerging Markets life and savings 1, Property and Casualty Banking 2, Asset Management 3, ,049 Invested by operations - New business (life) 3 (118) (136) Transfers from required capital Other movements: - Economic variances 3 (18) (62) - Other non-operating variances 3 7 (1) (11) (63) Core continuing operations Includes Emerging Markets VIF transfer of 186m (2014: 184m) as well as expected existing business return of 37m (2014: 29m) and experience & other items of 58m (2014: (2)m). 2. Banking comprises Nedbank and the banking and lending businesses in Emerging Markets (OMF, CABS, Faulu and OMSFIN). 3. Old Mutual Wealth no longer report full MCEV disclosures and free surplus is now prepared from local statutory calculations. All Wealth values are now reflected as asset management. Comparatives have been restated. 4. Nedbank and OM Asset Management are now included as Group s share of post-tax AOP was included as Group s share of cash dividend. Comparatives have been restated. A25

26 GROUP 1 FREE SURPLUS GENERATION 2015 ( m) 2 Covered business 180m Non-covered business 765m (16) (136) (63) Expected return Transfers from VIF Experience variances & assumption changes Transfers from Investment in new Economic & nonoperating required capital (A) business variances Operating earnings Transfers to required capital (B) 3 3 Total free surplus 4 generation 1. Core continuing operations only. 2. OMEM covered business only; Old Mutual Wealth reported in non-covered business. 3. A+B= 95m per previous slide A Free surplus generation before business unit cash deployed. A26

27 SOURCES AND USES OF CASH Business Units PLC Revenue Costs Remitted from BUs Net corporate flows (incl. acquisitions & disposals) Internal cash buffer Profit / free surplus OMW & OMAM Plc Cash OMEM & Nedbank Reinvested in growth (organic & inorganic) Retained for future growth Remitted to PLC Rand(OMEM, Nedbank) Hard currency (OMW, OMAM) Dividends Interest and other Group costs Retained / Reinvested in BUs A27

28 APPENDIX 4 SOLVENCY II INVESTMENT SAVINGS INSURANCE BANKING

29 GROUP CAPITAL Regulatory Internal FGD FGD Solvency II EC EC ( bn) 31 Dec Dec Jan Dec Dec 2015 Total capital resources available Total capital resource requirements Group surplus Coverage ratio 164% 160% 135% 226% 229% We are appropriately yet not excessively capitalised under both the current and evolving capital rules Going forward, we will manage the business to target a Group ratio above our early warning threshold of 120% A29

30 PRUDENT SOLVENCY II PREPARATION BASIS Old Mutual specifics Standard formula Group Surplus from businesses held through South Africa restricted due to application of Solvency II fungibility and transferability rules in respect of South African exchange controls and demutualisation agreement Consolidation of OMW insurance entities and deduction and aggregation for other insurance business units No reliance on transitionals 1 and matching/volatility adjustors Credit default risk on SA government included per Solvency II rules for non-european government exposures Immaterial guarantees in European businesses Goodwill in OMAM not recognised Implications Transparent calculation basis South African businesses do not contribute to the Group surplus, Group Solvency II ratio does not represent the underlying strength of individual businesses Prudent approach that does not recognise diversification between non-european insurance businesses Solvency position for the Group is not reliant on material ongoing regulatory approvals More onerous charge for South Africa government bonds compared to European governments bonds Not impacted by the artificially high ultimate forward rate Group ratio is prudent with no recognition of the market value of OMAM 1. Except in relation to the grandfathering of our Group debt instruments issued prior to A30

31 GROUP AGGREGATION OM Group Solvency II: a combination of the consolidation and deduction and aggregation methods Entities in rest of world Entities held through South Africa Insurance GHO 1 OMB 2 OMEM 2 Group debt and other OMW 1 SII for insurance entities IoM moving towards equivalent regime BMA deemed equivalent but SII used for Group SII for Group reporting until SAM equivalence achieved Impact of SAM equivalence on Group ratio expected to be minimal, but has a number of benefits at entity level Noninsurance OMW 1 Sectoral rules OMAM 1 Sectoral rules OMEM 1 Sectoral rules Nedbank 1 Basel III rules as applied by SARB 1. These Business Units form part of the consolidated group for Solvency II reporting. 2. The insurance entities in these Business Units are included on a deduction and aggregation basis. A31

32 Surplus ( bn) MOVING FROM GROUP FGD TO GROUP SII 160% 133% Group and OM Wealth South Africa 135% (1) (2) (3) (4) (5) (3) 1.6 Group FGD (31 Dec 2015) Restriction to surplus from South Africa 'Pro forma' FGD (31 Dec 2015) Additional SII own funds recognised Change in capital requirements Fungibility and transferability restriction in OM Wealth Additional SII own funds recognised Change in capital requirements Group SII (1 Jan 2016) Surplus not recognised 1) Surplus from South Africa is not recognised due to fungibility and transferability restrictions under Solvency II Applying a similar restriction to the FGD surplus results in a proforma FGD surplus of 0.9bn and ratio of 133% 2) Solvency II adjustments to own funds to move to best estimate liabilities and explicit risk margin 3) Solvency II risk-based requirement, calibrated to a 1 in 200 stress scenario 4) Solvency II fungibility and transferability restriction to surplus in Old Mutual Wealth relating to other non-insurance business 5) Additional own funds recognised in the insurance entities held through South Africa, which are limited to the solvency capital requirement due to fungibility and transferability restrictions A32

33 COMPOSITION OF QUALIFYING SOLVENCY II CAPITAL Total: 6.0bn Group Tier 2 debt contributes a total of 1.0bn to the Group Own Funds Group SCR is covered by Tier 1 capital (even after applying restrictions to the surplus from the South Africa) which represents 113% of the Group SCR Tier 1 represents 84% of Group capital after fungibility deductions Own Funds Tier 2 Tier 1 A33

34 COMPOSITION OF SOLVENCY CAPITAL REQUIREMENTS INSURANCE OPERATIONS OF MAJOR BU S Contribution to regulatory solvency capital requirements for our insurance businesses 1 Life underwriting Credit 31% Operational 4% 3% 2% 1% 7% 1% 3% 23% 19% 6% Market Consolidated European insurance Equity Interest rate Currency Spread Risk concentration Property Lapse Expense Mortality Other Non-life Credit underwriting Health underwriting Life underwriting 3% 3% 6% 3% 5% 7% 5% 26% Operational 21% 6% 3% 8% 3% 1% Market Aggregated OMEM insurance Lapse risk and equity risk are the most significant contributors to the regulatory capital requirements for our insurance businesses. These are based on Standard Formula prescribed stresses Represents the undiversified capital requirements. 2. The standard formula stress for listed EEA/OECD equities is -36.8%, for other equities is -46.8% and for strategic participations is -22%. The stress for lapses is the maximum of lapse up/down (+50%/-50%) and mass lapse (+40% for retail business, +70% for institutional business). A34

35 FUTURE REGULATORY DEVELOPMENTS and beyond Solvency II live from 1 January 2016 Full Solvency II quarterly reporting submissions to PRA SAM continues with parallel reporting in preparation for 2017 Twin Peak regulation in South Africa is a pre cursor to SAM going live European Commission proposals for Bermuda equivalence expected to be ratified by the European Parliament in Q First Solvency II annual public disclosure reports SAM expected to go live on 1 January 2017 Parallel reporting ends in South Africa First date SAM can achieve equivalence, EIOPA will determine timelines for equivalence assessments If so, requirement for South Africa to calculate capital on Solvency II basis for Group reporting ends New regime in Isle of Man expected to be implemented during 2017 Review of the Solvency II Standard Formula calibration (by December 2018) Changes in accounting standards, interpretations and practice standards, including a new insurance contracts accounting standard (IFRS 4 phase 2) and a new standard on financial instruments (IFRS 9) Other changes in regulation driven by the European Union institutions, the Basel Committee on Banking Supervision, the IAIS and national regulators A35

36 STRESS AND SCENARIO TESTING As part of our ongoing stress and scenario testing we have assessed the impact on Group capital of a downgrade in the investment status of South Africa, coupled with a deteriorating economic outlook for the rest of the world. The Business Units have sufficient capital to withstand these very significant shocks, and in these scenarios the capital positions would recover as the management actions took effect. The Group solvency ratio remains stable due to a combination of the resilience of Old Mutual Wealth, the ability of the restricted surplus in Old Mutual Emerging Markets and Nedbank to absorb the effects of the shock, and the depreciation of the rand. Although the capital position is resilient, this scenario would materially affect earnings in the business units. The Group dividend flexes within the dividend policy to accommodate the materially lower earnings. Key parameters used in the stress testing scenario over the business planning horizon: Equity markets - SWIX (RSA) (23%) 9% 1% - FTSE 100 (UK) (13%) 0% 5% - RLV 1000 (USA) (14%) 0% 5% Interest rates - RSA Prime (Nedbank) 13.3% 12.1% 10.2% - RSA 10 year government bond (OMEM) 10.9% 9.8% 8.7% Rand/GBP average Credit risk 100bps spread widening (OMEM) Up to 1.6% additional average credit loss ratio in Nedbank, 2.7% in OMEM Business risk 20% decrease in new business sales in OMEM 20% increase in lapses in OMEM A36

37 APPENDIX 5 BUSINESS UNITS INVESTMENT SAVINGS INSURANCE BANKING

38 OLD MUTUAL EMERGING MARKETS Visit: AOP (Rm) South Africa Life & Savings 6,519 7,298 Asset Management 2 1,178 1,163 Banking and lending Property & Casualty LTIR 1,714 1,788 South Africa 10,278 11,420 Rest of Africa Operating profit 834 1,026 LTIR Operating Result 1 (Rbn) Rest of Africa 1,318 1,658 Asia & Latin America Central costs 4 (1,109) (1,626) Total AOP (pre-tax) 11,033 12, SA Retail Affluent SA MFC SA Corporate OMIG P&C SA Rest of Africa Asia & LatAm 1. Pre-tax, excluding LTIR and central costs. 2. Includes the results of asset management businesses in OMIG and Retail Affluent. 3. Includes the results of OMSFIN and OMF. 4. Central costs include finance costs on new debt raised by OMLAC(SA) of R296m. A38

39 Visit: OLD MUTUAL EMERGING MARKETS: LIFE APE SALES BY SEGMENT AND PRODUCT (Rm) 1 4,000 3, Retail Affl 3,083 2 MFC Corp Rest of Africa Asia & 3 LatAm 3,495 3,636 3,000 2, ,987 2,496 2, , ,875 2,017 2, , ,202 2,543 1,088 1,000 1, ,478 1,649 1,885 1, Total R9,706m ( 543m) 182 Retail Affl 2 MFC Corp Rest of Africa 2015 Total R12,732m ( 652m) Asia & 3 LatAm Savings Protection Annuity RoA (combined) Asia & LatAm (combined) South Africa sales: 14% growth in regular premium sales driven by MFC (2-IN- ONE) and Retail Affluent (Old Mutual Invest), partially offset by lower Corporate sales against a strong comparative. Single premium growth of 48% driven by strong XtraMAX and Wealth sales in Retail Affluent (up 24%), and large deals secured in Corporate (up 82%). Rest of Africa, Asia and Latin America sales: Rest of Africa up 41%, driven by excellent growth in Zimbabwe supported by strong growth in Malawi and Namibia. Asia up 81%, driven by significant growth in India due to strong individual, group and credit term sales and higher sales in China via internet and broker channel sales. Significant growth of 32% in Latin America (Mexico) as a result of strong Retail Affluent sales through the AIVA channel (new Crea product). 1. Segments in South Africa are Retail Affluent, Mass Foundation, Corporate. Latin America & Asia includes Colombia, Uruguay, Mexico, India and China and Rest of Africa comprises Namibia, Zimbabwe, Botswana, Swaziland, Ghana, Malawi, Kenya, Nigeria, Uganda, DRC, South Sudan, Rwanda and Tanzania. 2. From January 2015, Mass Foundation conformed to the recognition basis for APE sales to that of Retail Affluent. The impact of this change on FY 2014 APE sales is +R245m. 3. Asia & Latin America represents Mexico, Colombia from Q only (R51m APE), and a proportional share of India and China. A39

40 OLD MUTUAL EMERGING MARKETS: RETAIL AFFLUENT AGGREGATE SALES GROWTH Rm % change Covered life APE sales Recurring premium 1,403 1,801 28% Single premium 2 1,370 1,694 24% Total covered life APE sales 2,773 3,495 26% Non-covered sales Unit trust/mutual fund 29,495 39,642 34% SA life licence unit trust 1 2, (80%) SA life licence other 1 1,535 1,415 (8%) Old Mutual International (OMI) life licence 1,2 4,971 5,480 10% Other 13,672 18,610 36% Total non-covered sales 52,662 65,747 25% Reported by Old Mutual Emerging Markets 47,691 60,267 26% Reported by Old Mutual Wealth (OMI life licence) 4,971 5,480 10% Visit: 1. Life licence business represents business sold by the SA life businesses that utilise a locally regulated life company licence and is classified as non-covered business from an MCEV perspective. 2. OMI life licence sales represent sales made in SA that are reported as part of Old Mutual Wealth s International business. A40

41 OLD MUTUAL EMERGING MARKETS: SPLIT OF SA LIFE RESERVES 1 Visit: (Rm) Retail 2 Corporate Total Smoothed 80, , ,590 Non-profit 32,195 16,277 48,472 Market-related 176,179 55, ,022 Total 288, , , (Rm) Retail 2 Corporate Total Smoothed 80, , ,426 Non-profit 34,616 13,823 48,439 Market-related 155,918 62, ,674 Total 271, , , Total reserves disclosed in OMLAC(SA) s stand-alone financials. 2. Includes the Retail Affluent and Mass Foundation segments. A41

42 Visit: OLD MUTUAL EMERGING MARKETS: 2015: SOUTH AFRICA ASSET MANAGEMENT FUND MIX NCCF (Rbn) FuM 1 : (Rbn) Revenue drivers (Rm) Pre-tax profit (Rm) Asset Class Gross inflows Gross outflows NCCF Dec 2015 Base fees Perf. fees & Transactional fees Invest return and Mark to Market Portfolio returns (Net interest margin) Other Dec 2015 Banking Asset Management Life Listed Asset Management 37.2 (30.5) Alternatives 1.4 (0.5) OMSFIN (25) Properties - (0.3) (0.3) OMIG 38.6 (31.3) , Other Asset Management (13.9) , (36) Central expense allocation (296) 315 Total 58.7 (45.2) , , Margins (bps) FUM shown on an end manager basis. 2. Other Asset Management includes primarily Private Client Securities (PCS) and Old Mutual Unit Trust (OMUT). For MCEV reporting, R154m of OMUT profits have been reallocated from Asset Management to Life & Savings profits with effect from December For the purposes of this analysis, OMUT profits have been included in Asset Management profits. 3. With effect from December 2015, R315m of central expenses have been reallocated from Life & Savings to Asset Management profits. Comparatives have not been restated. Full year 2014 equivalent was R238m. 4. Margin equals the annualised base fees/profit divided by average FUM. A42

43 Visit: OLD MUTUAL EMERGING MARKETS: 2014: SOUTH AFRICA ASSET MANAGEMENT FUND MIX NCCF (Rbn) FuM 1 : (Rbn) Revenue drivers (Rm) Pre-tax profit (Rm) Asset Class Gross inflows Gross outflows NCCF Dec 2014 Base fees Perf. fees & Transactional fees Invest return and Mark to Market Portfolio returns (Net interest margin) Other Dec 2014 Banking Asset Management Life Listed Asset Management 27.5 (34.9) (7.4) Alternatives 3.4 (0.7) OMSFIN Properties 0.2 (0.1) (3) OMIG 31.1 (35.7) (4.6) , , Other Asset Management (12.7) , (36) Central expense allocation (5) - (5) - Total 45.1 (48.4) (3.3) , , ,178 (36) Margins (bps) FUM shown on an end manager basis. 2. Other Asset Management includes primarily Private Client Securities (PCS) and Old Mutual Unit Trust (OMUT). 3. Margin equals the annualised base fees/profit divided by average FUM. A43

44 OLD MUTUAL EMERGING MARKETS: ADJUSTED NAV Visit: AOP & valuation multiples (Rm) AOP (after tax and NCI) FY 2015 Adjusted NAV 31 December 2015 Implied Multiple Life & Savings 5,942.1,2 56,311 9x Asset Management ,219 8x Property & Casualty 494 6,835 14x Banking & Lending 914 4,978 5x OM Emerging Markets 8,153 74,343 9x Life & Savings restated on a MCEV basis (Rm) 31 December 2015 MCEV operating earnings 1,2 7,529 AOP after tax and MI for non-covered business 257 Life & Savings earnings 7,786 Implied multiple 7x 1. The main reconciling differences between Life & Savings AOP and MCEV operating earnings are the alignment of the statutory basis to the reported basis for investment contracts, increasing MCEV by R623m with no impact on AOP, and other VIF earnings (excluding the impact of the alignment) of R1,354m. 2. Included in Life & Savings AOP (after tax and NCI), and capitalised in MCEV is R111m of profit relating to life-wrapped business invested in OMUT unit trusts. These profits have been accounted for as Asset Management in AOP reporting for FY A44

45 OLD MUTUAL EMERGING MARKETS: ADJUSTED NAV Adjusted Group NAV FY 2015 FY 2014 AOP after tax & NCI Implied Multiple Adjusted Group NAV AOP after tax & NCI Visit: Implied Multiple Rm South Africa (including M&F) 56,247 6,821 8x 56,717 6,313 9x Life & Savings 47,957 5, x 48,462 4,623 10x Asset Management 2, x 3, x Property & Casualty 3, x 2, x Banking & Lending 2, x 2, x Rest of Africa 14, x 9, x Life & Savings 7, x 7, x Asset Management x 306 (23) n/a Property & Casualty 1 3, x x Banking & Lending 2, x 1, x Asia & Latin America 3, x 2, x Life & Savings x x Asset Management 3, x 2, x Emerging Markets 74,343 8,153 9x 69,021 7,326 9x Adjusted Group NAV includes holding in UAP, although profits are only included from the dates that ownership was acquired. 2. Included in Life & Savings AOP (after tax and NCI) for 2015 is R111m of profit relating to life-wrapped business invested in OMUT unit trusts. These profits have been accounted for as Asset Management in AOP reporting for FY A45

46 OLD MUTUAL EMERGING MARKETS: PROPERTY & CASUALTY Visit: Rm Gross written premiums 12,189 14,297 Net earned premiums 9,457 10,579 Claims 2 (5,847) (6,072) Acquisition expenses (1,526) (1,783) Operating expenses (1,946) (2,423) Underwriting Result (Rm) 1 Underwriting result LTIR Other (2) Personal Direct Distribution Corporate & Niche CGIC Commercial Rest of Africa AOP pre-tax & NCI Pre-tax, excluding LTIR and central costs. 2. Claims exclude the reallocation of operating expenses. Comparatives have been restated. 3. Excludes direct distribution. A46

47 OLD MUTUAL EMERGING MARKETS: PROPERTY & CASUALTY CLAIMS ANALYSIS Visit: Channel (Rm) Personal (excluding Direct Distribution) 1,562 1,621 Direct Distribution Commercial 2,304 2,381 Corporate & Niche CGIC Rest of Africa Total P&C Claims 5,847 6,072 A47

48 OLD MUTUAL EMERGING MARKETS: EAST AFRICA EXPANSION - UPDATE ON UAP Visit: Completed acquisition of 60.7% of UAP in June 2015 for R2.9 billion in KES 100 day integration plan successful New board and management structure in place Progress to date Governed through OM group operating model Launched a pilot of the direct business in December contribution to OMEM R1.0 bn of GWP R103m of AOP Rwanda Democratic Republic of Congo South Sudan Uganda Kenya Tanzania Merger of Life and Asset Management businesses during 2016 Strategic focus Leverage SA P&C skills in underwriting and claims management Main board listing of combined Group on the Nairobi Stock Exchange by end AOP is pre-tax & NCI reflecting share of associate profits in H (23.3% acquired in January 2015), and consolidated profits in H (additional 37.3% acquired in June 2015). A48

49 NEDBANK Visit: Rm Net interest income 22,961 23,885 Non-interest revenue 20,312 21,748 Impairments (4,506) (4,789) Operating income 38,767 40,844 Operating expenses (24,534) (26,110) Business Cluster Headline Earnings (Rbn) Indirect taxation (635) (783) Associate income Nedbank Corporate and Investment Bank (CIB) Nedbank Retail and Business Banking (RBB) Nedbank Wealth Nedbank Africa Headline profit before direct taxation 1 13,759 14, Headline earnings before direct taxation basis. On an AOP basis profit is R93m lower (2014: R2m lower). A49

50 NEDBANK TARGETS Visit: Metric 2014 Performance 2015 Performance ROE (excl goodwill) 17.2% 17.0% Medium to long-term target 5% above cost of ordinary shareholders' equity (to be reviewed during 2016) 2016 full-year outlook 1 Below target Growth in diluted headline earnings per share (DHEPS) 13.0% 8.5% consumer price Index + GDP growth + 5% Below 2015 growth and below target Credit loss ratio 0.79% 0.77% Revised to between 0.60% % of average banking advances Within target range NIR : Expenses ratio 82.8% 83.3% > 85% Below target Efficiency ratio % 56.1% 50.0% % Above target Common-equity tier 1 capital adequacy ratio (Basel III) Economic capital 11.6% 11.3% 10.5% % Within target range Internal Capital Adequacy Assessment Process (ICAAP) : A debt rating (including 10% capital buffer) Dividend cover policy 2.07 times 2.06 times 1.75 to 2.25 times Within target range outlook based on latest macro economic outlook and have not been reviewed by the Nedbank auditors. 2. Includes associate income in line with industry accounting practices. A50

51 OLD MUTUAL WEALTH Visit: m FuM based revenue Trail commission (345) (294) Other fees Pre-tax AOP ( m) Invest & Grow Manage for Value (24%) Risk return % Investment return Net revenue Admin. expenses (413) (480) Policyholder tax contribution Adviser fees (11) (11) AOP pre-tax % UK Platform 35% International OMGI Quilter Cheviot (8%) Europe (open) Heritage 1. Includes fixed fees from UK Platform and International, and excludes OMGI gross performance fees. A51

52 FuM ( bn)/aop ( m) Operating margin (%) FuM ( bn)/aop ( m) Operating margin (%) OLD MUTUAL WEALTH: INVEST & GROW ECONOMIES OF SCALE Visit: 80 UK Platform 40% 80 OMGI 40% 70 35% 70 35% 60 30% 60 30% 50 25% 50 25% 40 20% 40 20% 30 15% 30 15% FY 2013 FY 2014 FY % 5% 0% FY 2013 FY 2014 FY % 5% 0% FuM AOP (pre tax) Operating Margin FuM AOP (pre tax) Operating Margin A52

53 OLD MUTUAL WEALTH SOURCE OF EARNINGS Visit: m UK Platform UK Other Intl. OMGI Quilter Cheviot Invest & Grow MFV Open book Heritage business Managed for value Total Wealth FuM based revenue Trail commission (40) (4) (29) (126) - (199) (60) (35) (95) (294) Other revenues 2 58 (4) (14) Total net revenue Admin expenses (104) (57) (73) (111) (83) (428) (13) (39) (52) (480) Policyholder tax contribution Advisor fees (11) - (11) (11) AOP (pre-tax) Operating margin 26% 23% 41% 37% 29% 32% 65% 84% 78% 40% Revenue bps generated Tangible net asset value 4 ( m) 119 (29) comparatives are disclosed in the financial disclosure supplement. 2. Includes fixed fees from UK Platform and International, and excludes OMGI gross performance fees. 3. Revenue margin calculated using FUM based revenue and trail commission. 4. UK Other tangible net asset value excludes inter-company subordinated debt in relation to the acquisition of Quilter Cheviot. A53

54 OLD MUTUAL WEALTH UK HERITAGE VALUATION Visit: UK Heritage MCEV calculation ( m) IFRS NAV Goodwill & intangibles (178) (142) Tangible NAV Statutory valuation basis (78) (86) Value of in-force MCEV UK Heritage Key Value Indicators FuM ( bn) Surrender rate 1 9.3% 9.1% Cash remitted ( m) Maintenance cost per policy ( ) Operating Margin 79% 89% MCEV information is still appropriate for UK Heritage business as the run-off value is maintained. 1. The calculation of surrender rates is now based on average FuM in the year (previously opening FuM) and now excludes internal transfers. Comparatives have been restated. A54

55 OLD MUTUAL WEALTH ADJUSTED NAV Visit: AOP & valuation multiples ( m) AOP (after tax and NCI) 2015 Adjusted NAV Implied Multiple Peer Multiples (2015) 2 Open books ,161 11x St James Place / Hargreaves Lansdown/Standard Life: - Earnings multiple - 22x/36x/28x UK Heritage x Phoenix: - Earnings multiple - 18x - Price/Book 1.8x Old Mutual Wealth ,699 10x 1. The Open books and Europe closed book are included at net asset value. UK Heritage is included at MCEV. 2. Per Bloomberg as at 2 March Includes IFRS NAV of Quilter Cheviot (represented by assets acquired and goodwill) as well as capital funding from GHO to fund the acquisition. 4. AOP (after tax and NCI) excludes profits of 6m from Switzerland, which was sold during A55

56 INSTITUTIONAL ASSET MANAGEMENT: OMAM ADJUSTED OPERATING PROFIT Visit: $m % Change Management fees % Performance fees % Other revenue % Total revenue % Operating expenses (214) (239) (12%) Variable compensation (170) (202) (19%) Total expenses (384) (441) (15%) AOP pre-affiliate key employee distributions % Affiliate key employee distributions (40) (39) 3% Net interest expense - (3) (100%) AOP post-affiliate key employee distributions % Operating margin pre-affiliate key employee distributions 1 40% 38% 1. Operating margin post-affiliate key employee distributions and before interest expense is 33% (2014: 33%). A56

57 INSTITUTIONAL ASSET MANAGEMENT: OMAM NCCF ($bn) 1 Visit: Annualised revenues from NCCF ($m) (3.0) (6.6) (5.1) (1.0) (0.2) 0.8 (2.5) (3.2) (6.6) (4.7) (5.8) (5.4) (7.2) (6.7) (8.7) (9.1) (19.4) (19.3) (22.5) (31.7) Q Q Gross cash inflows Gross cash outflows Annual NCCF Quarterly NCCF Q Q Q Q Q Q Excludes affiliates disposed of during 2012 and OMAM (UK) which was transferred to Old Mutual Wealth from Q onwards. Includes the results of Echo Point which was discontinued in Q Annualised revenue is calculated by multiplying the annual gross fee rate for the relevant account by the net assets gained/lost in the account. Excludes Echo Point in 2012 and A57